What is Mortgage Refinancing?

Mortgage refinancing refers to the process of transferring an existing mortgage loan from one bank to another. This process typically occurs after the fixed interest rate period or the penalty period of the original mortgage ends. There are two main types of refinancing:

1. Balance Transfer Refinancing: Transferring the outstanding loan amount to a new bank while keeping the loan amount unchanged.
2. Cash-Out Refinancing: Obtaining a higher loan amount through revaluation when property prices rise, allowing withdrawal of the additional funds.

Refinancing Case Analysis

Suppose your property was originally mortgaged for 6 million HKD, with 3 million HKD remaining unpaid. If you transfer this 3 million HKD to another bank while keeping the loan amount unchanged, this is balance transfer refinancing. If the new bank reassesses your property value at 7 million HKD and is willing to offer a loan of 4.2 million HKD (assuming a 60% mortgage cap), you can obtain an additional 1.2 million HKD in cash, which is cash-out refinancing.

Advantages of Refinancing

Refinancing offers homeowners several benefits:

1. Lower Interest Expenses: Banks compete fiercely, often offering preferential rates to attract customers.
2. Cash Rebates: Many banks offer cash rebates equivalent to 1% to 2% of the loan amount.
3. Cash-Out Opportunities: When property values increase, refinancing allows you to withdraw part of the property's appreciation.
4. Repayment Plan Adjustment: Possibility to extend the repayment period or change the repayment method to reduce monthly payment pressure.

Refinancing Timing: Penalty Period Considerations

Choosing the right time for refinancing is crucial, especially considering the penalty period:

• You can start applying for refinancing 3 months before the end of the penalty period.
• Early application can lock in interest rates and rebates, enjoying the benefits of "win-win" strategy.
• Homeowners who purchased pre-sale properties need to wait until after moving in to apply for refinancing.

Refinancing and Mortgage Insurance

Refinancing not only optimizes mortgage terms but may also provide opportunities to cancel mortgage insurance:

• When refinancing during property value increases, it may lower the loan-to-value ratio, allowing cancellation of mortgage insurance.
• Canceling mortgage insurance may result in partial premium refunds, but this must be completed within a specific timeframe.

Mortgage Insurance Refund Schedule

Refinancing Process and Procedures

The refinancing process involves several steps and requires careful planning:

1. Select a suitable new mortgage plan
2. Prepare required documents (ID, income proof, etc.)
3. Submit refinancing application to the new bank
4. Appoint a lawyer to handle legal procedures
5. Sign new mortgage documents
6. Complete refinancing procedures